Entrepreneurial Marketing in Small Software Technology Firms: Use of Networks and Relationships

Transcription

1 Entrepreneurial Marketing in Small Software Technology Firms: Use of Networks and Relationships Keywords marketing, entrepreneurship, networks, relationships, technology, SMEs. Introduction This paper reports on recent research findings and also the continuing research of Entrepreneurial Marketing (EM) in small software technology firms (SSTFs). This research has been carried out in order to investigate and compare the effects of ecosystems in two different countries and, to establish the effect that this may have on a firm s Entrepreneurial Marketing Orientation (EMO) and, on firm growth. In this paper we discuss especially the use of networks and relationships in the marketing of small software technology firms, and present some preliminary results from Welsh and American empirical data. Firms today operate in a business environment characterized by increased risk and, decreased ability to forecast, with fluid firm and industry boundaries and high levels of information asymmetry. Markets are uncertain and are becoming fragmented and frictionless, with firms interacting as competitors, customers, and collaborators in a global, knowledge economy. Such changes have had an effect on marketing (Schindehutte et al., 2008) and reflect the type of marketing practiced in small firms, being informal, unplanned and non linear (Bjerke and Hultman, 2002; Fillis 2002). Also nnetworks in the SME context are said to be often informal, loose, unstructured, spontaneous and structured around and conform to industry norms (Gilmore et al., 2001). Use of networks that provide access to external resources and gain competitive advantage are described as the essence of entrepreneurship and a distinguishing factor between fast and slow growth firms (Jarillo, 1989). In the EM literature ability to leverage resources is a basic premise that differentiates entrepreneurial firm behaviours from those that are more traditional (Morris et al., 2002). This research addresses these issues by using the EMICO framework (Jones and Rowley, 2009) which contains fifteen identified dimensions of EMO and will enable exploration as to how EM is practiced in SSTFs, in different contexts. This will enable assessment of how and why such EM oriented behaviours may lead to sustainable growth in challenging markets. One of the EMICO framework dimensions is Networks and Relationships. The researchers were in particular, interested to investigate in which ways entrepreneurs use networks and relationships to overcome typical limitations small firms often face, such as liabilities of newness and smallness, and whether those ways and behaviours differ in two different country ecosystems. Research rationale There is growing interest in research at the interface between marketing and entrepreneurship (Bjerke and Hultman 2002; Hills et al., 2008) together with the importance of SME marketing. The literature suggests that entrepreneurial networks are fundamental to SME marketing and EM activity (Carson et al., 1995; Collinson and Shaw, 2001; Gilmore et al., 2001). The findings of this research confirmed the importance of networks to SSTFs. More recent research has identified a need for a more processed view of networks. For example, Slotte-Kock and Coviello

2 (2010) assert that though extensive work has been carried out in relation to entrepreneurship research on network relationships, governance and structure, a more process-oriented research is yet to emerge. More recently, Vasilchenko and Morrish (2011) answered such calls in their research study on the role of entrepreneurial social and business networks by focusing on the facilitation of networks and the internationalization of SME high-technology firms. According to Hoang and Antoncic (2003), networks consist of a set of actors linked by set of relationships. Typically network studies distinguish between social networks and more formal business networks; the former being developed from personal relationships and the latter from repeated and goal-oriented economic exchange. Vasilchenko and Morrish (2011) observe that networking could substantially improve the ability of small companies to quickly explore and exploit opportunities, thus improving their competitiveness and their likelihood of survival. Hence, our study defines Networks and Relationships according to EMICO framework and descriptors developed in Jones and Rowley (2009) study. The EMICO definition is based on the prominent prior work on strategic orientations; entrepreneurial orientation, market orientation, innovation orientation and customer orientation (EO, MO, IO, CO). As the researchers analysed the empirical data we viewed Networks and Relationships as the ability of resource leveraging; capacity for building network and business competence; use of social networks or personal contact networks; creation of value through relationships and alliances; the intra-firm networks; and market decision making based on daily contact and networks. Research methodology Currently, there have been few comparative qualitative studies which consider EM practices inherent in different business ecosystems. Using the prescribed foundations, the researchers used the EMICO framework in the research of an equal sample of Welsh and American SSTFs together with reliable performance measures, so as to establish those marketing activities, attitudes and behaviours which contribute to firm growth. Application of the framework was replicated from the Jones and Rowley study (2009). This involved the following procedures: a SSTF sample was chosen using purposive sampling procedures (Shaw, 1999) and four criterion: firm age; size (micro and small firms with under 50 employees); offering both a software product and service support; and, in the same geographic area (samples in Wales and Silicon Valley). An informal interview approach using a semi-structured interview protocol was applied, being considered more likely to gain valuable insights into the attitudes and behaviours of individuals in the firm. A semi-structured interview protocol and card methodology (Müthel and Högl, 2007) was included in the interview context. This method is most suitable for capturing intangible notions such as individual and firm behaviours. Welsh data consisted of 21 interviews with informants from 6 firms. The informants were both entrepreneurs and employees. American data included 12 interviews with informants who were entrepreneurs from 6 firms located in the Silicon Valley area, in California. Thus, altogether there were 33 interviews from 12 different software technology firms. Other data captured included respondent data and firm data, including firm % increase in turnover over the last five years and annual turnover for the last financial year. En vivo statements from respondents were gathered and data was coded and analysed using coding matrices (Miles and Huberman 1999). 2

3 This was compared with firm performance data. For the purposes of this paper we analyzed just the parts of the transcripts which dealt with networks and relationships. Preliminary findings Key findings arising from this study with regards to use of networks and relationships included the way in which opportunities were exploited, how resources were leveraged and, how value was created for customers. In this respect, this research also furthers the findings of the SME literature on networks which are identified as being a fundamental activity for SME marketing (Carson et al., 1995; Gilmore et al., 2001). This research has confirmed a range of networks that are prevalent in the software technology sector and in SSTFs. Identified networks in this sector included owner-manager personal contact networks (PCNs), business networks, business advice networks (banks, accountants, solicitors, business support agencies), university networks and customer networks. In Wales often the owner-manager had the most network contacts and used them to increase capacity in the firm for a variety of business and marketing reasons. In Silicon Valley, entrepreneurs felt that that the whole Silicon Valley ecosystem was just about relationships. There it not what you know; it is whom you know and what value you bring to the table that makes the difference. Networks in this sector were vital for leveraging resources. Innovation networks and partnerships created opportunities through shared projects, in several cases university collaborations were used to further develop research and development (R&D) in the firm. As the research on technology companies suggests, business alliances and partnerships with larger firms create a wealth of opportunities for firms (Boussara and Deakins, 1999). The SSTFs marketing capacity was increased in firms where they had entered channel partnerships and partnerships with larger companies. This reciprocal arrangement benefited smaller firms by increasing business opportunities in the market, innovation opportunities in partnering to develop new products and particularly important in NPDs, large firms had the marketing resources to prepare the market and create demand for a new software product. There were also obvious benefits for larger software firms in the partnership, smaller firms were often more able to develop unique and innovative products, were closer to the market and had more knowledge of that market. Customer relationships and networks were also identified during the research. These relationships were usually with the owner-manager and sometimes with customer facing employees in the firm. Generally employees in the firms tended to have fewer networks. Customer-facing employees developed customer networks and close relationships with individual customers. This provided essential marketing for the firm as customers often became advocates and generated new customers by word-of-mouth recommendation. The research uncovered implicit networks that were used by technical employees. These were informal webbased IT networks. Initial data analysis findings in the two business ecosystems when compared seem to be surprisingly similar; though further in-depth and detailed analysis is under way. Both in Wales and the Silicon Valley almost every firm and informant interviewed obtained their market information primarily via use of network relationships. Information was gathered through personal contacts with friends and business contacts with other companies. Moreover, 3

4 relationships with public institutions such as universities and the entry to business associations to increase the probability of generating valuable market information was prevalent. This is consistent with Schulte and Eggers (2010) work. Additionally, most informants highlighted that networks are a valuable tool to initialize first sales. One Silicon Valley founder manifested that importance aptly when he wanted to add one more P in the 4P marketing framework partner in our industry is the extra P. Conclusions The preliminary research findings that have been surfaced are interesting because the EM literature recognizes entrepreneurial activity and influence, use of networks and network relationships together with marketing and innovation. However, despite the fact that researchers recognize that entrepreneurs develop close customer relationships as part of their marketing activity, and EM views customer relationships as part of a co-creative activity and a value creation process (Hills and Hultman, 2005; Stokes, 2000) the importance of a customer orientation is not core to the EM concept. Accordingly, this research has sought to extend the knowledge of EM by investigating a sample of SSTFs. In this way, investigation of software firm s EM activities and behaviours has drawn into the debate the importance of customer relationships for the marketing of software in small entrepreneurial firms, a key factor identified and challenged in the early stages of the research (Jones and Rowley, 2007). 4

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